Mutant Frog Travelogue :: All posts (c) by author

Month: April 2005

A Japanese oil company on Thursday requested test-drilling rights in the East China Sea, in disputed waters just a few kilometers from where China is preparing full-scale drilling.

Teikoku Oil Co. submitted an application to the Ministry of Economy, Trade and Industry to drill for oil and natural gas in three areas totaling 400 sq. km. Two of the areas lie flush against the Chun Xiao and Duan Qiao gas fields, where China’s drilling rigs are set up along the border of the exclusive economic zone claimed by Japan.

If Japan is going to piss off China by prospecting in contested waters, the least they could do is give the license to a company with a less offensive than than IMPERIAL OIL! If you look at any random Japanese article on this topic then you’ll see that ‘Teikoku Oil’ is written as ‘帝国石油’ – and that Teikoku(帝国) is the Japanese/Chinese word for Empire. It’s like they’re writing their China’s anti-Japan propaganda for them.

I was bored on the Internet one day when I found the Forbes list of the World’s Richest People. Pretty interesting: 3 people from Microsoft and Michael Dell are in the top 25, and the IKEA founder is #6. So since I only really give a crap about Japanese stuff, I’m going to introduce you to Japan’s billionaires (names are given name first this time). There are quite a few of them, so expect this as part of an ongoing series. Or you can just read it for yourself!

The first billionaire from Japan doesn’t even show up until number 77. It’s Nobutaka Saji, heir to Japan drink giant Suntory. Love the mustache. I went to a school owned by Suntory, so I guess I should be grateful:

Country of citizenship: Japan
Residence: Hyogo, Japan
Industry: Beverages
Marital Status: married
University of California at Los Angeles, Master of Business Administration

While Suntory sales fell nearly 5% last year, profits rose 13% to $219 million thanks to more effective supply-chain management. From a spiffy new $190 million new headquarters in Tokyo’s bay area the company is aggressively pushing its products in China, mainly Shanghai. Though it specializes in liquid and food, Suntory—against all odds—engineered the world’s first blue rose, which it plans to introduce to the market in a few years.

Next up at number 80 (tied with British nobility and a Saudi banker who pays no interest in accordance with “Islamic banking rules”) is personal finance mogul Yoshitaka Fukuda, founder of the dreaded Aiful (slogan: “With heartful communication”). Their commercials are inescapable in Japan (they feature an old man who decides to go into debt after falling in love with an adorable little dog), and they have spawned a slew of equally-annoying imitators:

His Aiful took the lead as Japan’s largest consumer finance company in terms of sales, thanks to the stumble of scandal-tainted rival Takefuji. Last year profits rose 4% to $4.5 billion. A Chihuahua featured in Aiful commercials became an overnight sensation, and Chihuahuas selling for $1,500 a pop replaced dachshunds as pet store favorites. But all was not rosy. In August Fukuda was found guilty of failing to declare $647,000 in income between 2000 and 2001. Fukuda ias (sic) an avid fisherman, focusing on sweetfish in particular.

At 84 we have another personal financier, the head of Takefuji, who has been embroiled in a scandal of sorts:

Two years ago Takei, founder of consumer loan giant Takefuji, was arrested on wire-tapping charges stemming from allegations that he compelled employees to tap the phones of journalists critical of his company. He was found guilty in November and sentenced to a four-year probation of sorts. Should he violate the terms of that agreement, he will face a prison sentence of at least three years. The results of his bad behavior haven’t been good for Takefuji, which saw rivals like Acom and Promise encroach on its turf. Last year (year ending March 2004) Takefuji’s net profit fell 21% to $708 million on diminished sales.

We won’t find another Japanese billionaire until number 103, politician, businessman, and golf course heir Eitaro Itoyama. Seems like the consummate Japanese businessman. Oh, and did I mention he’s a blogger?

Owns vast, privately held real estate portfolio. Itoyama, a former politician, is a large shareholder of Mitsubishi Heavy Industry and JAL. A vocal shareholder, he publicly criticizes Mitsubishi in his sporadically maintained online journal. One of his entries includes a vociferous gripe against Mitsubishi Motors CEO Takashi Nishioka, for throwing money into rebuilding Mitsubishi Motors. “If he was really that capable, he would have been able to inflate the stock price much higher,” he said. “What in the world kind of math did he come up with?”

Pressure for revaluation of the RMB continues to mount on both the financial markets as well as on the Chinese government. Meanwhile, debate continues among economists, financial analysts, and currency traders as they remain vigilant for signs of an impending change in China’s currency policy.

The Financial Times’ Richard McGregor reports that yesterday for around 20 minutes the RMB traded 8.27 to the dollar, slightly higher than its set band of between 8.2760 and 8.8600. Although there was no confirmation as to whether the Chinese government was involved in any trades at this higher price, some observers took it as a sign that the government was testing the waters for a revaluation in the near future.

“…[T]he point is that they are ready to do it and could move at any time,” [Frank Gong, a strategist with JP Morgan in Hong Kong] said. He said the higher rate remained on trading screens for up to 20 minutes, a sign that the authorities may have been testing the market “to see how much ammunition they may need to keep everything under control”.

Beijing has been sending strong signals in recent weeks that it has completed all the technical preparations necessary to remove the US dollar peg and allow greater flexibility for the currency.

Congress is clearly worried about the harm an undervalued Yuan may do to politically sensitive sectors of the U.S. manufacturing industry. They have been especially concerned following the expiration of the multi-fiber agreement on January 1st of this year, motivated by fears that a surge of cheap Chinese textile imports would put more Americans out of work.

the People’s Republic of China with a significant trade
advantage by making exports less expensive for foreign consumers and by making foreign products more expensive for Chinese consumers. The effective result is a significant subsidization of China’s exports and a virtual tariff on foreign imports.

Schumer proposes a 27.5%* tariff on all Chinese exports to the U.S. unless Beijing agrees to revalue the RMB. Frighteningly, the bill survived a preliminary vote earlier this month and is scheduled for one final vote in July.

…World Trade Organization authorization on the grounds that persistent currency manipulation represents both an illegal export subsidy and “nullification and impairment” of previously negotiated liberalization.

Whatever China’s decision, it will not be an easy one. (Anymore than Senator Schumer’s proposed quick fix be quick or a fix for U.S. industry and our widening trade deficit. But I digress.) Pegging the RMB to the dollar is a dangerous and double-edged sword. Although revaluation may ease international pressure on Beijing for now, it will likely create a set of new and equally difficult economic challenges both internationally and domestically.

The next post will examine some of implications of a currency revaluation and look at these problems in more detail.

*27.5% is the average undervaluation of the RMB cited in the text of the legislation.

Hardly a week passes without at least one article on Chinese currency policy by at least one major newspaper. In the ongoing debate over maintaining, adjusting, or abandoning the RMB’s peg to the dollar, one commonly cited reason in favor or adjustment is the increasingly large flow of speculative capital into China.

Consider this report, posted yesterday and updated today by the Financial Times:

The World Bank on Wednesday said China should revalue the renminbi and abandon the dollar peg in favour of a link to a basket of currencies.

It warned that without revaluation, speculative capital flows could destabilise economies in the region.

Homi Kharas, the bank’s chief economist for the region, said there was no imminent risk of a financial crisis caused by currency speculators, like that in the late 1990s, but “very large volumes of money” flowing into the region threatened economic distortions.

And just how large are the “very large volumes of money” currently flowing into China? Because such flows are illegal, gathering accurate data is impossible. But it is possible to make reasonable estimations. According to China’s central bank and Reuters:

China’s foreign exchange reserves jumped $49.2 billion in the first quarter to a record $659.1 billion, the central bank said on Thursday, signalling persistent inflows of capital betting on a yuan revaluation.

China posted a trade surplus of $16.6 billion in the first quarter, compared with a trade deficit of $8.4 billion a year earlier. Foreign direct investment in China was $13.4 billion in the first quarter, up 4.5 percent on the year.

That left some $19 billion* in other transactions on the balance of payments, much of which analysts believe was speculative money inflows betting on a revaluation of the yuan.

One popular desitination for these speculative inflows is the property market. By converting U.S. dollars into RMB, and then investing in China’s booming real estate sector, a speculator doubles his chances of profit – once from the rise in property prices, and once again from the rise in the price of the RMB in dollar terms should the Chinese government revalue.

And just how booming is real estate in China, you ask? According to Brian Bremner and Frederik Balfour’s excellent article Businessweek Online:

New hundred-square-meter apartments in posh sections of Shanghai have doubled in value, to $550,000, since 2003. High-end properties in the Chinese megalopolis have shot up 20% during the past three months alone. It’s not just Shanghai. UBS Securities (UBS ) says overall urban land and property prices in China last year were up 70% over 2001.

Sounds pretty tempting, no?

Although figures on speculative capital flows and the latest global real estate boondoggle are a common sight in print and online, one thing I have yet to see addressed is exactly how speculators are moving into RMB positions given the supposedly tight controls on foreign exchange in China.

Exchanging small amounts of dollars for RMB and vice-versa is easy. Anyone who has travelled to China knows that this can be done at the airport (provided one holds on to those receipts!) or even through black market money changers.

But one can’t expect to purchace a prime piece of Shanghai property with the one thousand dollars worth of RMB purchased at the airport exchange desk. And even if one could purchase the property, and even if one were able to sell it for a profit, and even if the Chinese government did revalue the RMB, without a recepit for that new amount all that profit would be for naught, stuck inside China.

But if it were that easy for the Chinese government to stop speculative capital flows, there would not have been $19 billion worth of them in the first quarter of this year.

So how do they do it?

I was pleasantly surprised to see that the Mure Dickie and Richard McGregor of the Financial Times answered the question today in this article. Unfortunatly, it’s only accessable to FT.com subscribers, or in the print edition, but consider this fascinating introductory anecdote:

Using his permanent residency in France, Mr Hu set up an offshore company to buy property from a real estate business he established in China… The property did not actually exist. But the paper trail allowed Mr Hu to apply to [legally] bring 284,000 euros into China.

The Wenshou entreprenuer – who was unmasked last month by regulators – offers an example of the efforts that individuals and companies have been making to move funds into the renminbi amid widespread speculation that Beijing is moving towards a significant revaluation.

I still have no idea how Mr. Hu planned on getting his profits back out of China, but the story is interesting nevertheless. For anyone interested, the FT article goes on to list five other commonly used methds to, “bet on the renminbi despite China’s capital controls.” Here are three for your consideration (comments mine):

1) False trade accounting – Intentionally mark up the prices of your exports to bring in more dollars.

4) Increasing overseas leverage – Unless you’re one of the lucky few companies allowed to borrow abroad, forget about it.

Still not sure how they plan on changing back to dollars, but I suppose if the money is there, ways can be found.

*Forex numbers are online here, but for the life of me I can’t find balance of payments data, so don’t ask how Reuters came up with the $19 figure. If anyone cares to work out the math, it would be much appreciated.

Those of you who read the final post on my former site have probably guessed by now that I am not a terribly big fan of New York Times’ columnist, Thomas Friedman.

Originally, I had planned to write up a clever introduction to this review of Friedman’s latest book, The World is Flat. Then, a few sentences into it I realized there is very little worthwhile I could add to what New York Press‘ Matt Taibbi has already written, and I certainly cannot touch his sense of humor.

Knowing that I’ve been bested, I leave you with this small taste of Taibbi’s review, and my suggestion that you read the rest.

I think it was about five months ago that Press editor Alex Zaitchik whispered to me in the office hallway that Thomas Friedman had a new book coming out. All he knew about it was the title, but that was enough; he approached me with the chilled demeanor of a British spy who has just discovered that Hitler was secretly buying up the world’s manganese supply. Who knew what it meant—but one had to assume the worst

“It’s going to be called The Flattening,” he whispered. Then he stood there, eyebrows raised, staring at me, waiting to see the effect of the news when it landed. I said nothing.

It turned out Alex had bad information; the book that ultimately came out would be called The World Is Flat. It didn’t matter. Either version suggested the same horrifying possibility. Thomas Friedman in possession of 500 pages of ruminations on the metaphorical theme of flatness would be a very dangerous thing indeed. It would be like letting a chimpanzee loose in the NORAD control room; even the best-case scenario is an image that could keep you awake well into your 50s…

Despite going by ‘Mutantfrog’ online, I feel I’ve been neglecting coverage of my namesake animals. To rectify this problem I’ve just added a category on the right. Anura is the name for the order of amphibians which includes both frogs and toads, which will both get mentioned once in a while.

More than 1,000 creatures have puffed up and popped
The Associated Press
Updated: 12:43 p.m. ET April 27, 2005

BERLIN – More than 1,000 toads have puffed up and exploded in a Hamburg pond in recent weeks, and scientists still have no explanation for what’s causing the combustion, an official said Wednesday.

Both the pond’s water and body parts of the toads have been tested, but scientists have been unable to find a bacteria or virus that would cause the toads to swell up and pop, said Janne Kloepper, of the Hamburg-based Institute for Hygiene and the Environment.

“It’s absolutely strange,” she said. “We have a really unique story here in Hamburg. This phenomenon really doesn’t seem to have appeared anywhere before.”

The toads at a pond in the upscale neighborhood of Altona have been blowing up since the beginning of the month, filling up like balloons until their stomachs suddenly burst.

“It looks like a scene from a science-fiction movie,” Werner Schmolnik, the head of a local environment group, told the Hamburger Abendblatt daily. “The bloated animals suffer for several minutes before they finally die.”

Biologists have come up with several theories, but Kloepper said that most have been ruled out.

The pond’s water quality is no better or worse than other bodies of water in Hamburg, the toads did not appear to have a disease, and a laboratory in Berlin has ruled out the possibility that it is a fungus that made its way from South America, she said.

She said that tests will continue. In the meantime, city residents have been warned to stay away from the pond.

After my previous post on the real political reasons for Prime Minister Junichiro’s visits to the Yasukuni shrine, some readers may be wondering, “is this guy really a maverick?” I think the examples below will show that by Japanese standards, he’s practically James Dean.

First is a translation of a brief article I found on the Sankei website a few weeks ago but never got around to posting until now.

Prime Minister Junnichiro Koizumi on the 29th at a meeting of the Global Warming Countermeasures Promotion Headquarters in his official residence made a proclamation declaring “No necktie, no jacket. He also called upon to cabinet ministers to join him in incorporating it into environmental problem.

The PM stressed to the press corps that from now on, “If ministers in public offices do not also go necktieless then it will be difficult for their inferiors to do so.” He sought approval saying, “I will also go no-necktie and no-jacket, and I would like everyone to play along. Won’t it be better for everyone?”

Regarding the no-necktie, no-jacket style, Environmental Minister Yuriko Oike said “If this concerns you so much, why don’t we just have a fashion show?” It seems that this summer the fashion sense of the Prime Minster and the cabinet will be coming into question.

Next, here is a genuinely amazing picture of Koizumi, courtesy of the Shanghai Star. Can you name another politican who would dress up as Willy Wonka to teach children about bicycle safety?

Japanese Prime Minister Junichiro
Koizumi, wearing a suit with woven-in reflective material, rides
a bicycle in front of Japanese schoolchildren at a government-sponsored traffic safety campaign
event at a Tokyo elementary school on April 9. Koizumi visited
the school to talk to children about the importance of traffic
safety.

Curzon at Coming Anarchy also found this picture of Koizumi establishing relations with Indonesia from the ground-up.

Next, courtesy of Masa, we have a scan of the Shukan Gendai magazine’s ‘scoop’ photos of “The woman that Koizumi loved!”

Masa can of course explain the situation far better than I ever could.

Not only Clinton, but also Japanese prime minister, Koizumi also like to fuck. It’s absolutely true. following picture is Koizumi’s foremaer fcuking Geisha girl friend picture I took on the street and picked up by “Shukan Gendai” that is Japanese leading serious weekly magazine.
this geisha girl was really fucked by Prime minister Koizumi repeatedlly.

On April 25 at about 9:20am a message was left by an employee of the’Aimesse Yamanashi’ Yamanashi prefectural industrial relations hall in Kofu city, Ozu-cho at the South Kofu police station stating that “the Sino-Japanese commemorative frienship tree in our grounds has been cut down.”

The commemorative tree was 12 centimeters across and 5 meters tall. It had been cut with a saw-like implement approximately 30 centimeters from the base.

The tree was a 17 year old maple, planted on May 25 1995 to commemorate 10 years of ‘friendship city’ relations between Kofu and Sichuan, China. There had also been a commemorative stone plaque by the tree, but it had been defaced with red spray-paint and knocked over.